Anti-Trust and Regulation 13

Question 1

Imperfectly competitive industry

Answer 1

An industry in which individual firms have some control over the price of their output.

Question 2

market power

Answer 2

an imperfectly competitive firm’s ability to raise price without losing all of the quantity demanded for its product.

Question 3

Marginal Revenue Curve Facing a Monopolist

Answer 3

At every level of output except one unit, the MR is below price. This is because they cannot price discriminate, in order to sell more quantity they must lower the price. Therefore the increase in revenue is less than the price.

Question 4

What are barriers to entry in a monopolistic industry?

Answer 4

Economies of scale, patents, government rules, ownership of scarce factors, network effects.

Question 5

Sherman Act of 1890

Answer 5

Monopolists will be punished. Can’t be unreasonable in pursuit of profit.

Question 6

Clayton Act 1914

Answer 6

Outlawed specific practices, mergers that would create monopolies, banned price discrimination.

Question 7

FTC

Answer 7

Federal Trade Comission. Established in 1914 to investigate firms to ensure that they are acting fairly.